2022,when researching the topic with observations of 36 electricity enterprises listed on the Brazilian stock market over a 20-year period from 2000 to 2019, did not clearly state the im
General objective
The primary goal of this study is to examine how capital structure affects the profitability of companies in the electric sector that are listed on the Vietnamese stock market between 2009 and 2023 Following this goal, a research model will be developed based on prior research in order to assess the findings and provide suitable business recommendations within the electric sector
Specific objective
Based on the general objectives, the key objectives of the thesis are synthesized:
First, summarize the fundamental theories of capital structure, profitability, and the interrelationship of capital structure on profitability
Second, examine and assess the reality of how capital structure affects the profitability of electricity industry enterprises that are listed on the Vietnamese stock market during 2009-
Third, create a quantitative data model Then, using statistical software, run the model using linear regression method to test the degree of impact in which capital structure influences the profitability of companies in the electric sector and to determine how the variables are correlated
Fourth, make inferences, offer solutions, and create suggestions to assist all companies generally and enterprises in the electric sector particularly in increasing improve capital use profitability and enhancing profitability to be better
Research question
The graduation thesis provides suitable responses to a few of the following research topics in order to fulfill the aforementioned objectives:
- How profitable is the company? What is its capital structure?
- Based on the findings of earlier studies, how does capital structure impact overall firm profitability? Specifically, how does capital structure impact the profitability of electrical industry companies listed on the Vietnamese stock market between 2009 and 2023?
- If capital structure affects the profitability of businesses in the electric sector that are listed on the Vietnamese stock market, does this influence have a positive or negative effect, and are there any salient features that should be taken into consideration?
- In order to increase profitability, what ideal capital structure should companies in the electrical sector that are listed on the Vietnamese stock exchange suggest?
- What suggestions and remedies could electrical industry enterprises take into account to increase their profitability?
Research subject and research scope: 3
Research subject
The study's research subject is on how capital structure affects the profitability of businesses in the electric sector that are listed on the Vietnamese stock market on all 3 exchanges: HNX, HOSE, UpCoM.
Research scope
- Spatial scope: The research on this topic is restricted to 22 electricity firms that are listed on the stock market in Vietnam In the context of the total economy, this can be considered a modest number of enterprises The chosen research object might not be able to offer entirely convincing evidence regarding the financial management status of other electricity industry companies in particular and other sectors in general in the Vietnamese economy due to the peculiarities of the historical development of the Vietnamese stock market
- Time range: Information was gathered from the financial statements of 22 businesses in the electric sector that were chosen to list on the Vietnamese stock exchange throughout a 15-year period, from 2009 to 2023 It is claimed that choosing this research era best captures the current state of firms' access to financing, particularly those in the electric sector Furthermore, prior to 2009, a large number of organizations did not exist, which resulted in an unreliable amount of study observations used to construct data.
Research method: 4
Research process
To achieve its study goals, this thesis combines quantitative and qualitative research techniques There are three primary steps involved in the research process:
First, examining the research variables' descriptive statistics In order to evaluate the correlation between the study variables in the suggested model, use correlation analysis
Second, using regression analysis to measure the influence of control and capital structure variables affecting electricity firms’ profitability listed on Vietnam stock market
Third, testing research hypotheses and assess whether the regression model is suitable.
Data collection method
About qualitative analysis, in order to create research models, the theoretical underpinnings and prior research pertaining to the impact of capital structure on profitability of businesses are compiled using qualitative approaches so as to establish a suitable model specification In terms of quantitative analysis, the research measure the effect of capital structure on the profitability of electrical industry businesses listed on the Vietnam stock market with econometric regression models and statistical techniques using STATA 18 software Data for
22 electricity industry enterprises are synthesized from audited consolidated financial statements such as income statement, balance sheet, fnancial statement footnote of electrical industry enterprises listed on Vietnam stock market in three exchanges: HNX, HOSE, UpCoM with the total of 330 observations during the period of 2009 – 2023
Data analysis method
Descriptive statistical analysis was used to obtain a summary of the research sample Before analysing the study variables to the regression model, the research also analyzed the correlation between variables by the Pearson correlation ratio The research used the
Hausman and F-tests for the Pooled OLS, REM, and FEM models to determine and analyze which model was best for the investigation Lastly, the model's autocorrelation and heteroskedasticity issues are resolved by the GLS technique to maintain the reliability of all regression results
The graduation thesis includes all 4 chapters as follows:
- Chapter 1: Theoretical basis of capital structure, business profitability and literature review on the impact of capital structure on business profitability
- Chapter 2: Research methods and research models
CHAPTER I: THEORETICAL BASIS OF CAPITAL STRUCTURE, BUSINESS PROFITABILITY AND LITERATURE REVIEW ON THE IMPACT OF CAPITAL STRUCTURE ON BUSINESS
PROFITABILITY 1.1 Theoretical basis of capital structure
Different scholars define capital structure in different ways all across the world In the context of corporate finance, capital structure refers to the arrangement of various forms of capital that together constitute a company's assets It is an essential component of a business's foundation, supporting steady and reliable operations As a result, firms and researchers are continually interested in learning more about capital structure Capital structure, in particular, will assist investors in forecasting the company's financial picture and identifying different kinds of risks in the capital mobilization policy of the organization Therefore, firms need to investigate all of their capital sources to identify a fair structure that works for each individual in order to mobilize, manage, and employ capital efficiently
The decision of whether to finance a company's operations through debt, stock, or derivative securities is known as its capital structure (Myers, 1984) Capital structure, according to Abor (2005), is made up of a variety of securities Companies can combine a variety of securities, to create a capital structure that is specifically tailored to their needs Furthermore, Gill et al (2011) contended that a company's capital structure consists of the debt and equity that the company uses to conduct business Conversely, Nirajini and Priya (2013) contended that the capital structure consists of a blend of short-term debt (payables to the seller, overdraft and overdraft loans) and long-term capital (common shares, concessional shares, bank loans) Capital structure, as defined by Firer et al (2004), is the proportion of debt to equity that businesses utilize to fund their operations According to Wald (1999), the ideal
16 capital structure is the only one that maximizes the market value of the company's outstanding stocks Businesses can finance their assets with debt or equity capital with the best option of using both debt and equity to generate the lowest WACC of a firm or the highest market value of a firm
1.1.2 Classification and characteristics of capital in business
1.1.2.1 Classification of capital in business:
The balance sheet and the financial statements' notes provide detailed information about the financing form of the business, or the enterprise's source of capital, based on the ownership relationship The notes categorize the financing form into two groups: liabilities and equity, which are arranged in increasing stability In general, liability is an obligation between one party and another not yet completed or paid for In the world of accounting, a financial liability is also an obligation but is more defined by previous business transactions, events, sales, exchange of assets or services, or anything that would provide economic benefit at a later date Equity is the amount of money that would be returned to a company's shareholders if all of the assets were liquidated and all of the company's debt was paid off in the case of liquidation
B) Based on the scope of capital mobilization
Businesses can more easily assess a collaborator's capacity for self-financing and capital mobilization by using a categorization approach that groups collaborators based on the extent of capital mobilization From there, managers take the initiative to select sources of money to satisfy the company's capital requirements According to the above criteria, capital sources of enterprises include: endogenous, exogenous capital sources Exogenous capital is the amount of capital that an enterprise can mobilize from outside the enterprise to serve investment and production and business activities Endogenous capital is the amount of capital an enterprise generates from its own operations It demonstrates the ability of an enterprise to self-finance investment and production and business activities
C) Based on the time of capital mobilization
Businesses can create financial strategies and capital structure that are appropriate for their level of production and business characteristics by optimising capital mobilization
Therefore, business capital sources include: temporary and regular capital sources
Temporary capital is the capital that an enterprise temporarily uses for business activities for a short period of time, including short-term debts Regular capital is a capital source that an enterprise uses regularly, stably and long-term in its business operations
D) Based on capital turnover characteristic
According to this criteria, we can divide capital sources into two ways which is fixed capital source and working capital source Fixed capital is the amount of investment, advances for the purchase, construction or installation of tangible fixed assets or intangible fixed assets that are gradually rotated into parts over many cycles in the production and business process and ending that process since the fixed asset expires.Working capital is a key metric used to measure a company's short-term financial health and well-being It is the difference between a company's current assets and current liabilities As such, it is the capital that is left after accounting for its current liabilities
1.1.2.2 Characteristics of capital in business:
- Characteristics of liabilities capital source: The company is required to return the loan within the agreed-upon term and to pay back the interest at the agreed-upon rate which is comprising short- and long-term loans, bond issuance, employee payments, state budget payables, supplier payables, and several other payables.This can be considered one of the most crucial sources of funding for the growth of additional capital for production and the country's economy as a whole
- Characteristics of equity capital source: Capital resources possessed by shareholders in joint stock companies, business owners, and members of joint venture businesses are collectively referred to as equity Throughout its operational life, this cash source is utilized by
18 the company industry for an extended period of time without requiring payment to the owners.This kind of money is utilized by the business sector for an extended period of time without requiring payment to the owners.The capital given by investors, the entire amount of money made from production and commercial activities (undistributed earnings), and the difference in revaluation assets are the sources of equity
B) Based on the scope of capital mobilization
- Endogenous capital source: It displays the company's capacity to self-finance manufacturing process, and commercial endeavors An organization's internal capital sources can be defined as follows: earnings appropriated from profits, such as depreciation on other assets and fixed assets, and profits kept for reinvestment, periodic payables, materials and asset sales proceeds, or fixed asset liquidation proceeds
- Exogenous capital source: It is a source of funding that companies can access from outside their organization to support their production, investment, and business operations Personal loans, loans from banks and other financial institutions, the issuance of stocks and bonds, commercial credit, requests for joint venture capital, joint ventures, supplier commercial credit, and asset leasing are a few ways that businesses might raise money This source is considered to be important to raise better financial source for business operation
C) Based on the time of capital mobilization
- Regular capital source: The entire amount of stable capital available to businesses for use in operations; frequently utilized for fixed asset formation and acquisition, as well as a portion of regular current assets supporting operations, production, and other activities
Theoretical basis of enterprise profitability 18
An indication of profitability is the amount of profit a firm may make on a unit of cost or input element, or on an output unit that represents financial performance An enterprise's profitability is directly correlated with its potential to make a greater degree of profit on a unit of cost, input factor, or output that represents business outcomes, and vice versa The lower the profitability, the smaller the profit made per unit Businesses tend to focus on their own profitability as their primary focus while conducting business is making a profit
Maheshwari (2001) said that a company's profitability is determined by its capacity to turn a profit across all of its business segments This shows how well the management can produce revenue with the cash available in the market Growth in income is said to be the primary goal of every company To achieve this, a company's owner must acquire the skills necessary to reach a respectable level of production in a competitive market.For example, determining which components of a monetary policy are working and which ones need to be updated is known as cumulative productivity The management of any company bears the task of making the best choices to optimize the organization's profits Authentically, companies make sure they have return targets, and sometimes they reward executives for reaching them, but the aims of organizations continue to be larger than only their profits (Petersen
Adhering to the pecking order theory in the event of unequal circumstances, a business would choose to issue debt if internal funds were depleted but would choose internal funding over other sources of capital Issuing new shares would be the organization's least drastic alternative It is anticipated that recognized investors will intend to invest in profitable businesses This is because a more profitable business is less likely to evade taxes, be forced to deal with financial difficulties, or go insolvent (Williamson, 2001)
Siminica and Stefan (2011) defined profitability as the ability of a business, regardless of its kind or nature, to produce enough revenue to meet its operating costs and result in net income Based on this profit level, the business is categorized into microeconomic levels
Bauer (2004) posits that a business's profit margin is determined by the profit generated by the enterprise throughout the course of its operational years From a theoretical standpoint, companies that employ greater financial leverage are expected to generate better profits due to the advantages of tax shielding Put another, the more debt they employ the higher the predicted earnings
According to Addae et al (2013), profit margin is a metric of asset creation for shareholders and may be used in place of other words like enterprise value and stock value, wealth of shareholders As a result, managers ought to choose rational collaborators that can support managers in making decisions maximize shareholders’ value Making poor capital structure decisions will have an impact on the company's profitability and lower shareholder value
Gill et al (2011) argued that increasing a company's profitability is essential to its long-term survival, so there is no way to disregard the link between capital structure and corporate profitability Put another way, a company's primary objective must be profitability if it is to survive and grow over the long haul Any company that doesn't turn a profit over an extended period of time will eventually fail As a result, it is crucial to ascertain a company's existing profitability as well as project its future potential
According to Hamid et al (2015), profitability—also referred to as financial performance—is directly correlated with the capital structure of the business Profitability is unquestionably the
30 pinnacle of corporate effectiveness An organization may only be considered businessly efficient when it generates significant profits This is only possible when the business makes efficient use of its resources, enhancing the efficacy and profitability of its operations Profitability is essentially the manifestation of the combination of labor, labor materials, and labor objects in a certain quantitative and qualitative connection that constitutes the business process Furthermore, profitability is an indicator that were used to assess if it makes sense to invest in a certain company's shares.Because of this, before taking a financial risk, investors typically employ a number of techniques to assess a company's profitability As a result, companies must identify methods to improve asset profitability in order to remain competitive Profitability ratios can take many different forms For example, financial indicators used by most organizations include return on equity, return on assets, and return on sales
The group of profitability indicators that reflect business performance includes the following
5 indicators: Return on assets (ROA), return on equity (ROE), return on sales (ROS), return on capital employed (ROCE) and earnings per share (EPS)
According to Hamid et al (2015), profitability—also referred to as financial profitability—is directly correlated with the capital structure of the business ROA is the most widely used and reliable financial indicator of a company's performance, not withstanding its shortcomings By displaying both the income statement performance and the assets required to operate the firm, it offers a first-rate evaluation of the operation of the business "ROA is a general- purpose financial metric used to measure the relationship between profitability and necessary investment assets to generate profits," according to David Lindo, cited by Siminica
& Stefan (2011) In addition, the needed profit contribution from new investments may be calculated using the ROA ratio as a base According to Tailab (2014)’s research, ROA is a solid indicator of profit since it is linked to the company's profit on its core assets Also, return on
31 assets is a financial statistic that's used to gauge each asset's profitability The idea that ROA serves as a proxy for corporate earnings is supported by Phan Thanh Hiep (2016) This ratio is computed by dividing the net profit—also known as profit after taxes—of the company during the reporting period, which might be one month, one quarter, half a year, or one year, by the total asset worth of the firm during that time The income statement provides information on net profit or profit after taxes, whereas the balance sheet provides asset value information
The formula of ROA is determined as follows:
This statistic displays the average profit a company presently makes per unit of assets A company's assets and after-tax earnings are the two aspects that influence this indicator Global norms state that ROA of more than 7.5% is better Analysts, however, usually assess these outcomes over a minimum of three years Companies will be deemed excellent if they satisfy all three of the following requirements: ROA must be greater than 7.5%, grow steadily over time, and be sustained for a minimum of three years
Nguyen Minh Kieu (2009) stated that the return on equity ratio is a financial metric used to assess a company's profitability per unit of capital Also, ROE is frequently used to track changes in a company's performance over time or to compare performance of companies in the same industry This also demonstrates the business's capacity to deploy capital to generate profits The numerator in this ratio is the net income for shareholders, which is determined over a certain time period—one month, one quarter, half a year, or one year— from the income statement, in which this period is known as the reporting period Also, the denominator used in this ratio is the common equity capital
The formula of ROE is determined as follows:
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 (%) The amount of profit that a dollar of equity will generate after taxes is shown by return on
32 equity This ratio provides a precise way to assess how much profit a dollar invested will yield over time According to Nguyen Thi Ngoc Trang and Nguyen Thi Lien Hoa (2007), a positive ratio indicates profitability for the firm, whereas a negative figure indicates a loss The more efficiently a company uses its equity capital, the better its return on equity Businesses that have a greater and more consistent ROE are seen to make efficient use of capital This indicates that companies have emphasized their competitive advantages to increase earnings during the capital-raising process by striking a harmonic balance between equity and liabilities International guidelines state that companies are deemed to have enough financial capability if their ROE exceeds a minimum threshold of 15% However, rather of focusing just on assessing each year, we need take into account a minimum of three years in order to assess an enterprise's successful use of capital If the return on equity remains more than 15% for a minimum of three years, the business is deemed to possess adequate financial resources and competitive advantage in the industry Investors can analyze 3 factors that make up the ROE ratio: profit margin, asset turnover, and fixed asset turnover to get the most general perspective However, there are many tricks that businesses use, such as buying back treasury shares or using accounting tricks, to increase the ROE ratio to make their business more attractive to investors
A financial metric used to track a company's profitability is the return on sales ratio, according to Nguyen Minh Kieu (2009) It illustrates how firm sales and net profit accessible to shareholders are related The profit that is calculated using the above method might be either gross profit, profit from the sale of goods and services, net profit from operations, or profit before (after) taxes Revenue earned from sales and service activities (net revenue), revenue from business activities (including net revenue and financial revenue), or the total revenue and other income of the enterprise for the period (including net revenue, financial revenue, and other income) can all be determined in the denominator of the above formula in accordance with the profit target
The formula of ROS is determined as follows:
Literature review 24
For many years, academics in the field of corporate finance have focused their attention and investigation on the connection between capital structure theory and business profitability A company's capital structure shows how much debt and equity were utilized to fund its assets Using more or less debt will have an influence on managers' actions, behavior, and finances, all of which will affect the profitability of the organization As a result, it is crucial to take into account how capital structure and firm profitability are related This is because creating and preserving a suitable capital structure will maximize shareholder wealth
Through an analysis of the relationship between the performance of enterprises as measured
35 by ROA and ROE with short-term debt, long-term debt, and total debt, Ahmad et al (2012) investigated the impact of capital structure on the business performance of enterprises The study sample included financial information from 2005 to 2010 that was gathered from 58 consumer and industrial businesses listed on the Malaysian stock exchange The study's findings demonstrated that both overall debt and long-term debt had a statistically significant detrimental impact on ROA On the other hand, the profitability determined by ROE was negatively impacted statistically by short-term, long-term, and overall debt
According to Fekadu Agmas (2020) analysis of the top 30 construction businesses in
Ethiopia from 2011 to 2015, there is a substantial positive link between ROE, ROA and debt-to-equity, long-term debt to total assets ratios But among the Ethiopian construction enterprises in the sample, the capital structure as determined by debt-to- assets exhibits a negative association with ROE and ROA
The impact of capital structure on a business's ability to operate as determined by market indices and accounting techniques was examined in the research "Capital structure and corporate performance: Evidence from Jordan" (Zeitun and Tian, 2007) For 15 years, starting in 1989, the research analyzed a sample of 167 Jordanian businesses across 16 distinct industries Regarding how capital structure and profitability are related, research have drawn the following conclusions: Businesses' profitability is often negatively impacted by capital structure; the ratio of debt to total assets (TDTA) significantly negatively relates to both return on assets (ROA) and market value profitability (Tobin's Q)
Study by Gill et al (2011) in "The effect of capital structure on profitability: Evidence from the United States" examined how capital structure affected the profitability of 272 USA companies from 2005 to 2007 that were listed on the New York Stock Exchange (NYSE) and in the manufacturing and service sectors The dependent variable in the study is ROE, whereas the independent variables are the ratios of short-term (SD/A), long-term (LD/A), and total debt to total assets (D/A) The findings indicate that short-term debt to total assets (SD/A) and total debt to total assets (D/A) have a positive association with ROE for the service sector In contrast, the manufacturing sector shows negative results for 20 of
36 the independent variables of ROE model However, the time period used in the study was only 2 years between 2005 and 2007, which could create inaccurate data for the model
The study "The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana" by Abor (2005) was conducted using a sample of 22 businesses that were listed between 1998 and 2002 on the Ghana Stock Exchange (GSE) The association between an enterprise's capital structure and profitability was examined by using the OLS model One indicator of a company's profitability in particular is return on equity (ROE); capital structure comprises three ratios of debt-to-total assets: short-term debt to total assets, long-term debt to total assets, and total debt to total assets The ratio of short-term debt to total assets and the ratio of long-term debt to total assets exhibit a substantial positive association, according to the data Also, the proportion of total assets to total debt made a significant negative impact to ROE ratio This demonstrates that firms will become more profitable when they use debt more frequently, particularly short-term debt with low interest rates In addition, the ratio of debt to total assets has a negative impact on return on equity (ROE), indicating that firms will become less profitable when they use more long-term debt and debt expenses
In "The relationship between capital structure &profitability," Velnampy and Niresh (2012) investigated the connection between capital structure and profitability on ten Sri Lankan listed banks over the course of eight years, from 2002 to 2009 The study's dependent variables include net profit margin, net interest margin (NIM), return on equity (ROE), and return on capital employed (ROCE) The ratios of debt to equity and debt to total capital are examples of the independent variables All dependent variables and independent variables have a negative association, according to the data, with the exception of the link between debt-to-equity and return on equity ratio, which is positive The research only relied on data from one sector for research and analysis, thus the conclusions may not be relevant for generalizing to other industries owing to variances in features
In order to investigate the impact of capital structure, the research "The impact of capital structure on the business performance of enterprises after equitization in
Vietnam" (Doan Ngoc Phuc, 2014) used 217 samples of businesses that were listed between 2007 and 2012 on the two stock exchanges in Ho Chi Minh City and Hanoi Businesses' post-equitization financial performance is impacted by their capital structure The profitability of the business are represented by the dependent variables ROA and ROE, while the capital structure is represented by the independent variables short-term debt to total capital, long-term debt to total capital, and total debt to total capital
Le Thi My Phuong (2012) conducted research on how capital structure affected the integration period's profitability 207 listed construction firms in Vietnam's sub- sectoral norms between 2010 and 2015 provided audited financial statement data that research used The dependent variable ROE and the independent variable capital structure were shown to positively correlated, according to the findings Variables related to firm size and solvency showed a negative effect, while growth rate and the fixed asset ratio had both favorable effects
Doan Thuy Duong and Dinh The Hung (2014) used data from 235 companies currently listed on the stock exchange HOSE period 2011-2013 to analyze the relationship between capital structure and profitability of businesses listed on the Vietnam stock market The panel regression model (POOLED) and fixed effects model (FEM) were used to compare the results The study's use of earnings per share (EPS) and return on equity (ROE) ratio is noteworthy; this is comparable to research done by Hasan et al (2014) and Salim and Yadav (2012) Debt-to-equity (D/E) and long-term debt-to-equity (LD/E) are two variables that are used to indicate capital structure
Tran Thi Kim Anh (2017) has researched "The relationship between capital structure and profitability of real estate enterprises listed on the Vietnamese stock market," carrying on the research work of Doan Thuy Duong and Dinh The Hung (2014) The
38 research sample consists of real estate enterprises listed on the stock market in
Vietnam from 2011 and 2015 The thesis dependent variables are ROA, ROE, and EPS, while the independent variables are debt-to-equity (D/E), short-term debt-to-equity (SD/E), and long-term debt-to-equity (LD/E) The findings indicate that while the total debt-to-equity ratio and short-term debt-to-equity ratio have no link with EPS, they do have a negative correlation with ROE and ROA More specifically, there is a positive correlation between ROE and long-term debt to equity ratio In summary, the business's profitability is positively impacted by long-term debt to equity, but negatively impacted by short-term debt to total assets and the debt-to-equity ratio
Nguyen Anh Hien (2019) investigated the variables influencing the profitability of businesses Data from audited financial statements of 192 companies registered on HOSE were used in the study, which ran from 2010 to 2018 The research sample consisted of randomly selected firms, which were not securities, insurance, or banking enterprises Three methods of estimating the research model were employed in this study: fixed effects model (FEM), random effects model (REM), and conventional regression model All methods were performed using STATA 18 The study's findings demonstrated how profitability is influenced by a number of variables, including financial leverage, and liquidity
Tran Trong Huy and Nguyen Thi Ngoc Han (2020) employed a dataset of 34 publicly traded companies within the energy industry from 2012 to 2019 According to research, there are three types of debt that negatively affect a company's profitability: total debt to assets (TDTA), long-term debt to assets (LD/A), and short- term debt to assets (SD/A) Company’s scale (SIZE), tangible assets (TANG), and growth (GROW) are examples of control variables that positively impact firm’s profitability Conversely, the liquidity ratio (LIQ) has a detrimental impact on the profitability of businesses which provides the opposite result of the above variables
First, a number of experimental researchers in the form of scientific articles, theses, or dissertations showed relatively different research results with differences in space time and so forth, such as: El-Maude et al (2016), Almajali et al (2019), who believe that businesses should use a debt-oriented capital structure to increase profitability However, according to Pouraghajan et al (2012) and Onaolapo & Kajola (2010), an enterprise's operating profitability will decrease if it adopts a capital structure that favors debt
DATA AND METHODOLOGY 30
Research process 30
According to Kumar (2005), the research process is a system of actions that take place in a certain order and is associated with a knowledge base as well as a logical thinking system for the steps Within the scope of this definition, the research
41 process includes a system of thinking steps while applying knowledge about scientific research methods and processes, specialized knowledge, and a system of research questions from the beginning This helps propose practical problems that need to be researched until appropriate answers are found Also, a specific order for the steps in the research process must be followed There are many researchers who propose a 6- step process (Cooper et al., 2006) or 8-step process (Kumar, 2005) However, the 7- step research process is most commonly applied in scientific research by scholars in foreign investigations or Vietnam investigations during the research process to produce the most appropriate research results
Graph 2.1 Research process in a scientific research by scholars
Step 1: Choose a topic and set research goals
Choose a topic and establish research objectives in accordance with appropriate standards to ensure that the issue has scientific significance and gains practical as well as theoretical worth
Learn and research previous theoretical and experimental research works related to measuring business performance or the influence of some factors on the enterprise’s profitability
Step 3: Identify the factors that need to be analyzed and evaluated
Choose a topic and set research goals
Identify the factors that need to be analyzed and evaluated
Build models and set research hypotheses
Analyze and discuss research results
Make recommend ations and conclusions
To support the relationship between capital structure and profitability, identify and ascertain the elements that impact profitability and make sure these factors are shared by the majority of electricity firms listed on Vietnam's stock exchanges
Step 4: Collect and process data
Gather information by deciding on the objectives and data sources to be gathered based on the platforms that are available and personal expertise Next, go through the gathered data and examine, filter, and standardize it
Step 5: Build models and set research hypotheses
Determine which factors affect profitability, then postulate a relationship between them and create a quantitative analytical model The thesis then use STATA software to create the model and get the findings of their research
Step 6: Analyze and discuss research results
The capital structure and profitability of electricity firms listed on the stock market in Vietnam should be examined and discussed in light of theory, reality, and research findings
Step 7: Make recommendations and conclusions
After summarizing the findings and taking into account the demands of the current society, offer suggestions for creating the best possible capital structures in order to increase profitability.
Research method 31
In order to facilitate data analysis and comparison, the thesis makes use of secondary data sources that were compiled from internal documents and information of each electricity enterprise listed on the Vietnamese stock market These sources typically consist of consolidated financial statements over the course of the research period or external data from sources like the World Bank (WB), the General Statistics Office of
Vietnam (GSOVN), and economic websites like VIETSTOCK and Cafef Therefore, the thesis makes use of standard techniques including description, statistics, and quantitative methodologies First, data will be gathered and processed using Excel software Next, the data will be imported into STATA 18 software to create a regression equation In order to give the thesis a certain depth, research also employ qualitative analysis techniques, such as data synthesis, comparison, and analysis of indicators connected to graph and table tools to emphasize the relationship between the dependent variable of profitability and the independent variable of corporate capital structure However, to ascertain the association between variables and profitability, the article's primary research methodology is quantitative method through the use of regression models, including Pooled OLS, FEM, and REM Without taking into account the unique characteristics of every business in the research sample, the pooled OLS regression model views businesses as homogeneous Although they are derived from the OLS model, regression models like FEM and REM are able to differentiate between various business characteristics The independent variable and the model's residuals are similar, according to FEM REM, however, is unable to convey this Therefore, research use the F-test, Hausman test, and Lagrange test to compare the three models and decide which is better In particular, the F-test is used to select between OLS and FEM, and the Lagrange test is used to choose between the two models, OLS and REM The best model is identified by using the Hausman test The research also performed the tests: autocorrelation, heteroskedasticity; to test whether these phenomena exist, then proceed to overcome using the FGLS estimation method
At the end, the thesis make conclusions on the effect of capital structure on the profitability of listed electricity firms in Vietnam by contrasting the quantitative results with those of earlier research and combining them with the real-world circumstances of the issue
Research Data 32
The research sample chose data from electricity corporations listed on the Vietnamese stock market in order to produce findings regarding the effect of capital structure on the profitability of these businesses Vietnam has three stock exchanges: UpCoM, HNX, and HOSE.22 electricity firms that were listed on the Vietnam’s stock exchanges between 2009 and 2023 make up the sample under analysis In order to verify accuracy, clarity, and completeness of the data, secondary data from the firms' audited annual financial statements and information from VIETSTOCK, a website specializing in gathering and presenting financial data of listed enterprises in Vietnam's stock exchanges, were used The topic therefore includes two-dimensional array data with dimensions: year number, number of businesses with 330 study samples from 22 companies in the electricity sector that are listed on HNX, HOSE, and UpCoM over a 15-year period from 2009 to 2023 Also, observational datas are distributed over time and space during this period This is also the time when the power grid is invested and developed the most as electricity companies are constantly expanding the scale and capacity in parallel with the digital transformation revolution in all fields including the electricity industry In addition, at this time the electricity industry also faces many challenges and opportunities Summarizing the above reasons, the thesis is decided to choose this period in order to collect and research data
The thesis propose a research model for the topic that is the dependent variable of profitability with 2 representatives: return on total assets - ROA, return on equity - ROE, the independent variable is represented by debt to total assets ratio - TDTA, debt to equity ratio - TDTE, and four control variables including: current ratio - CR, enterprise’s scale – SIZE , tangible fixed asset ratio– TANG, sales growth – SG, total asset turnover – AST, gross domestic product – GDP The data that need to be collected are: profit after tax, total assets, equity, debt-to-equity ratio, debt-to-total asset ratio, tangible fixed
45 assets, net revenue from the audited balance sheets and consolidated income statements of electricity industry enterprises selected as research samples on websites specializing in economic, financial and stock data – VIETSTOCK Then the research processed the table data by creating a spreadsheet summarizing variables using Excel software with the purpose of exporting a complete file of table data to complete the thesis.
Research model 34 1 Research variables and hypotheses
2.4.1.1 Research variables a Dependent variables: A dependent variable is one that is entirely determined on the values of other variables in a relationship or function Stated differently, the values of the independent variables influence the changes in the dependent variable To gauge a company's profitability, a variety of metrics are available, including ROA, ROE, and EPS Because of their benefits, two dependent variables had been employed in this thesis— ROA (return on total assets), and ROE (return on equity), to assess the effect of capital structure on profitability The link between profits and actual production costs is depicted by the two indicators, ROE and ROA, which also highlight the business acumen of industry leaders in applying those variables This makes it possible to evaluate the business's potential for profit after taxes and asset utilization profitability overall Since the EPS ratio does not indicate the profitability earned, the source of capital, or the manner in which the business has utilized capital to achieve profit after taxes, it was not chosen as a dependent variable due to chiefly limitations highlighted in the research of Siminica & Stefan (2011) and Hamid et al (2015) b Independent variables: To assess the relationship between capital structure and profitability of electrical industry businesses listed on the Vietnamese stock exchange, research offer two variables that indicate capital structure These are the debt to total assets ratio (TDTA) and the debt to equity ratio (TDTE)
+ Debt-to-total assets ratio (TDTA): This ratio shows how much debt a company has
46 compared to its total assets It's frequently used to assess a company's financial risk and ability to pay off debt It makes it possible for stakeholders, including investors, to know how much debt a company is utilizing to fund its operations in relation to the overall value of its assets This ratio is frequently used by businesspeople to assess a company's risk A company's risk increases with its debt ratio, which might result in bankruptcy and losses for other enterprises Numerous domestic researchers, including Doan Ngoc Phuc
(2014) and Nguyen Thi Quynh Nga (2020), as well as scholars from the international, such as Abor (2005) and Ahmad et al (2012), have come to the conclusion that the profitability of businesses generally, and that of the electricity industry companies listed on the
Vietnam stock exchange in particular, is negatively correlated with the ratio of debt to total assets In light of the foregoing result, the research suggest the following study hypothesis:
Hypothesis ( 𝑯 𝟏 ): Impact of the debt-to-total assets (TDTA) ratio to the profitability of electricity firms listed on Vietnam stock market are negative
+Debt-to-equity ratio (TDTE): Similar to the debt-to-total assets ratio (TDTA), the degree of financial autonomy of the business increases with a smaller ratio, indicating that debt represents a smaller percentage of total equity Furthermore, it can be said that the ratio decreases with decreasing financial risk to the business Research by Mahfuzah et al
(2012), Pouraghajan et al (2012), and others has demonstrated that this ratio has a negative impact on business profitability The research suggest the following study hypothesis:
Hypothesis ( 𝑯 𝟐 ): Impact of the debt-to-equity (TDTE) ratio to the profitability of electricity firms listed on Vietnam stock market are negative c Control variables: Variables that remain constant during an study or experiment are known as control variables The purpose of control variables is to limit the influence of external factors on the dependent variable Therefore, control variables include six variables: current ratio (CR), enterprise’s scale (SIZE), sales growth (SG), asset turnover (AST), tangible fixed asset ratio (TANG), growth rate of GDP (GDP)
+ Current ratio (CR): This indicator serves as a benchmark to assess a company's viability by demonstrating its capacity to use its current assets to settle short-term debts owed to entities and individuals A company that lacks cash runs the danger of going insolvent Even if this is excessive, it will reduce profitability because it indicates that there are short-term asset surpluses, which raise opportunity costs, maintenance expenses, and revenue declines As a result, the company must efficiently manage and utilize assets Current ratio has been suggested positively correlated with a business's profitability by the research of Le Thi Phuong Vy & Phung Duc Nam (2013) and Singh & Bagga (2019) Therefore, the following hypothesis on the relationship between profitability and current ratio will be presented:
Hypothesis ( 𝑯 𝟑 ) : Impact of the current ratio (CR) to the profitability of electricity firms listed on Vietnam stock market are positive
+ Sales growth (SG): Researchers frequently utilize the rate of gross asset growth or gross revenue growth to calculate a company's growth rate However, research decided to use revenue as a proxy for growth rate because the goal of this study is to assess the relationship between capital structure and profitability Based on earlier experimental research by Pouraghajan et al (2012), Tran Thi Bich Ngoc et al (2016), and others, which shown that growth rate has a comparable effect on the profitability of enterprises indicated by ROE and ROA variables, the thesis propose the following hypothesis based on the experimental research above:
Hypothesis ( 𝑯 𝟒 ) : Impact of enterprises’ sales growth (SG) to the profitability of electricity firms listed on Vietnam stock market are positive
+ Asset turnover (AST): This important ratio is employed to efficiently evaluate a company's assets in order to produce income This is the quantity of times a business’s xn asset is used to produce income in a specific time frame The following hypothesis is based on studies by Onaolapo & Kajola (2010), Muritala (2012), and Hoque et al (2014) that demonstrate the positive relationship between asset turnover and firm’s profitability so as to assess the impact of ratio to the prime of total assets operated
Hypothesis ( 𝑯 𝟓 ) : Impact of enterprises’ asset turnover (AST) to the profitability of electricity firms listed on Vietnam stock market are positive
+Enterprise’s scale (SIZE): The scale used in this dissertation is the logarithm of the total assets of all the enterprises that were investigated at the end of each fiscal year In the same field, distinct companies are categorized using the enterprise's scale Specifically, this variable is considered to be deemed typical to the electricity industry due to its characteristics as large companies tend to have better business operations than smaller ones Some researchers contend that a company's size can impact its profitability; as a result, large companies with a reputation and resource advantage will have many competitive advantages in the market to improve business profitability as well as increase business profitability (Zeitun and Tian, 2007; Agiomirgianakis et al., 2006) In addition to two studies by Zeitun and Tian (2007) and Agiomirgianakis et al (2006), Tran Thi Kim Anh
(2017), Phan Thu Hien & Nguyen Nhat Ha (2020) has proposed that company’s scale has a positive relationship with its profitability So the thesis suggest the hypothesis:
Hypothesis ( 𝑯 𝟔 ) : Impact of the enterprise’s scale (SIZE) to the profitability of electricity firms listed on Vietnam stock market are positive
+ Tangible fixed asset ratio (TANG): In particular, tangible fixed assets play a significant role in boosting the competitiveness and corporate value of non-financial businesses
Typically, in electricity firms, this ratio demonstrate their scale as it tells the level of fixed assets investing in power projects so as to supply electricity for the economy and electricity trading enterprises This metric represents the pattern of asset volatility throughout the reporting periods and displays the percentage of investment in the company's tangible fixed assets Since it is frequently backed by long-term, stable, and proactive capital—that is, tangible fixed assets have a beneficial effect on capital structure—and is recognized as an existing mortgage of significant economic worth, it also serves as a foundation for making corporate borrowing simpler Based on earlier researches by Phan Thanh Hiep (2016), Zeitun and Tian (2007), indicating that the ratio negatively affected profitability, the research conduct the following hypothesis:
Hypothesis ( 𝑯 𝟕 ) : Impact of tangible fixed asset ratio (TANG) to the profitability of electricity firms listed on Vietnam stock market are negative
+ Growth rate of GDP (GDP): The accelerated growth rate of a nation's economic production value over a given time period is known as its GDP growth rate; it is typically expressed as a percentage of the preceding year This is one of the most important economic indicators for measuring the health and growth of an economy Since GDP is a measure of the economy's total demand, an increase in GDP indicates a healthier economy and encourages more businesses to expand In other words, the country's economy and growth are generally stronger and more expansive when the GDP growth rate is higher as it encourages businesses to expand their production and boost their profitability The GDP and company’s profitability have a positive correlation, according to numerous prior research of Antonina (2010);
Lee(2014) Therefore, the thesis suggest the hypothesis for this thesis:
Hypothesis ( 𝑯 𝟖 ) : Impact of growth rate of GDP (GDP) to the profitability of electricity firms listed on Vietnam stock market are positive
In order to evaluate the effect of capital structures on the profitability of electricity firms listed on the Vietnamese stock market, the thesis will construct a regression model based on a summary of prior research, as follows:
𝑅𝑂𝐴 𝑖𝑗 : Return on total assets of enterprise i in year j
𝑅𝑂𝐸 𝑖𝑗 : Return on equity of enterprise i in year j
𝑇𝐷𝑇𝐴 𝑖𝑗 : Debt-to-total assets ratio of enterprise i in year j
𝑇𝐷𝑇𝐸 𝑖𝑗 : Debt-to-equity ratio of enterprise i in year j
𝐶𝑅 𝑖𝑗 : Current ratio of enterprise i in year j
𝑆𝐺 𝑖𝑗 : Sales growth of enterprise i in year j
𝐴𝑆𝑇 𝑖𝑗 : Asset turnover of enterprise i in year j
𝑆𝐼𝑍𝐸 𝑖𝑗 : Scale of enterprise i in year j
𝑇𝐴𝑁𝐺 𝑖𝑗 : Tangible fixed asset ratio of enterprise i in year j
𝛽 𝑛 : Regression coeficient of independent variable n (𝑛 = 1; 2; ; 8)
Table 2.1 Description and expected sign of variables of regression model
Type of variable Name of variable Description
Independent variables Debt-to-total assets ratio 𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡
Enterprise’s scale Ln (total assets) SIZE +
Growth rate of GDP Data collected from GSOVN GDP +
EMPIRICAL RESULTS 40
Overview of electricity industry and electricity companies listed on the
3.1.1 Overview of electricity industry in Vietnam
During the period of 2011 to 2019, Vietnam's economy grew at a rate faster than the national average, about 10–11 percent annually on average after more than 30 years of fast and energy-intensive growth By the end of 2019, the total amount of power generated and imported into the system was 239 billion kWh, a 2.35-fold increase from 2010 In 2019, the system's maximum subload capacity (Pmax) was 38,249 MW Furthermore, with regards to power supply, the national power system's total set capacity as of the end of 2019 was 54.880
MW Hydropower (22,54 GW, accounted for 29.0% of total), coal (25.31 GW, accounted for 32.5% of total), and renewable energy (including wind and solar electricity, 20.16 GW, accounted for 26.4% of total) are the main energy supply sources Besides, the percentage of gas turbines (7.16 GW, accounted for 9.2% of total) is noteworthy as more families are interested in this energy While the volume of traditional power source construction only reaches around 60% of the intended, the system's overall installed capacity approaches 94% of the total planned power source capacity Around 17,000 MW of power, including small hydropower and renewable energy, have been placed into service by the electricity sector in the first five years (2011-2015), accounting for more than 81% of the total volume delivered under Power Plan VII between 2011 and 2015 About the electricity grid, by the end of 2019, the 220-110 kV line's length had grown from 23,156 km to 43,174 km (a 1.9-fold increase) and the transmission transformer stations' capacity had increased by roughly 2.8 times from 2010 to 2019 The total length of the 500 kV line was 8,496 km, which is 2.2 times longer than it was in 2010 Also, following five years of Electricity Planning Adjustment VII execution, the transmission grid achieved 70–90% coverage for the full 2016–2020 timeframe In addition, establishing grid connections with nearby nations has shown to be highly effective In 2019, 3.1 billion kWh of electricity were imported from China and Laos, making up 1.4% of the system's total electricity output Therefore, Vietnam's electricity grid is considered to be the largest in the ASEAN by the end of 2019 Vietnam's electricity access score has also improved significantly, moving up 129 spots in just five years (from 2013 to 2018), from 156/189 countries in 2013 to 27/190 in 2018, and ranking fourth in the ASEAN For strategically placed islands in the sea (such Phu Quoc, Co To, Ly Son, Kien Hai, etc.), EVN makes investments in the national power infrastructure to guarantee a steady supply of electricity To illustrate, the 11/12 district's power supply of Phu Quoc is now managed by EVN As of right now, 99.52 households—99.25 percent of which are in rural areas—and 100% of the population have access to electricity
Graph 3.1 Vietnam’s electricity system scale at the end of 2019 (unit: percentage)
From 2020 to present, after the COVID-19 pandemic, the situation of electricity production and electricity business has changed significantly from the time of the pandemic due to the differing electricity policy of the Ministry of Commerce to adapt to the circumstances from time to time In 2020, about electricity generation, in comparison to the transmission electricity output of 2019 (224.01 million kWh), the total transmission power output in 2020 increased by 3.36% to 231.54 billion kWh The overall cost of producing power in 2020, with the aforementioned electricity output, is 310.962.60 billion VND, or 1.433.34 VND/kWh, which is the price for producing commercial electricity Moreover, about electricity transmission process, in 2020, 203.85 billion kWh of transmission electricity was produced
2020 also saw an overall cost of 16.855.56 billion VND for electricity transmission, or 77.69 VND per kWh for commercial power transmission Also, about the electricity distribution and retail process, the price of 308.54 VND per kWh was represented by the total cost of
66.936.98 billion VND for retail distribution of energy Then, about auxiliary - industry management process, the entire cost of subsidiary management was 1,444.23 billion VND, or 6.66 VND per kWh for the commercial power sector's subsidy management, 8% down from the previous year.
VIETNAM'S ELECTRICITY SYSTEM SCALE AT THE END OF 2019
Hydropower Coal Renewable Energy Gas Turbine
Graph 3.2 Costs of each process in Vietnam's electricity production in 2020
Source: Ministry of Industry and Trade Vietnam
In 2021, about the electricity generation, the system's total installed power supply capacity reached 76,620 MW, up 7,500 MW from 2020 Of this, the total capacity attributed to renewable energy sources (solar and wind) was 20,670 MW, up 3,420 MW from 2020, and accounted for 27.0% of the system Vietnam's power grid had the highest electricity capacity in the ASEAN area as a result It is also the second year in a row peaking to this record after
2020 Regarding energy production and supply, the maximum system-wide subload capacity on June 2, 2021, was 43.518 billion kWh, up 11.3% from 2020 (39.111 billion kWh); power output generated and imported throughout the system in 2021 was 256.7 billion kWh, up 3.9% from 2020 To clarify, the following bar graph will demonstrate the electricity output generated and imported for each source in 2021:
COSTS OF EACH PROCESS IN VIETNAM'S ELECTRICITY
PRODUCTION IN 2020 (UNIT: BILLION VND)
Electrcity distribution processElectricity transmission processAuxiliary - industry management process
Graph 3.3 Electricity generation and import throughout the entire system in Viet
Nam in 2021 (unit: million kWh)
The electricity production and purchase output in 2021 was 246.21 billion kWh, up 3.25 percent from 2020 Of this, 123.68 billion kWh, or 22.07% more than 2020, came from sources outside of EVN in 2021 About the electricity distribution and retail process, it increased by 4.88% to 9.51% for industrial components such as construction, consumer management, and agriculture; the most affected component of COVID-19 such as commercial, hotel, bank industry, declined by 12.2%, and other sub-loading components by 5.08% In addition to it, the total amount of power distributed to the business sector in EVN was 225.3 billion kWh, up 3.85% from 2020 Of this total, the largest increases were from EVNNPC (9.31%), EVNCPC (6.33%), EVNHANOI (3.28%), and EVNSPC (1.32%) Regarding 2020, EVNHCMC decreased by 5.42% About electricity transmission process, a unique characteristic of the 2021 system is that transmission electricity output reached 200,86 billion kWh, a 1.47% decline from 2020, even if the output of generated energy and commercial electricity still grew One of the causes is that high wind and solar output have been fed straight into the system to power subloads About auxiliary - industry management process, the overall expense of subsidiary management comes to 1,509.52 billion VND, which is equivalent to 6.70 VND per kWh for commercial and electrical sector subsidies
ELECTRICITY GENERATION AND IMPORT THROUGHOUT THE
ENTIRE SYSTEM IN VIETNAM IN 2021 (UNIT: MILLION KWH)
Hydroelectric Coal thermal power Gas turbines Oil thermal power
In 2022, about the electricity generation, the system's overall power supply capacity increased by approximately 1,400 MW from 2021 to around 77,800 MW But only 29.901
MW, or 38.4% of the system's total capacity, come from the power ratio of EVNs and EVN GENCOs The combined capacity of these is as follows: heat and gas production is 7.160 MW - 9.2%; hydro power (including minor hydroelectric power) is 22.544 MW - 29.0%; coal thermal power is 25.312 MW - 32.5%; and renewable energy sources (wind, solar) are 20.165 MW - 26.4% Vietnam's electricity grid has the largest capacity in the ASEAN area, which also marked the third year peaking to this record after 2021 Regarding energy production and supply, the total amount of energy produced and imported by the system in 2022 was 268.4 billion kWh, a 5.26 percent increase over 2021 The system's maximum subload capacity for
2022 is 45.434 MW per day (as of June 21, 2022), up 4.41% from 2021 (43.518 MW) To clarify, the following bar graph will demonstrate the electricity output generated and imported for each source in 2022:
Graph 3.4 Electricity generation and import throughout the entire system in Viet
Nam in 2022 (unit: million kWh)
Moreover, EVN generated and purchased 261.2 billion kWh of electricity in 2022, an increase of 6.08% over 2021 Of that amount, 139.4 billion kWh were purchased from sources outside of EVN, representing 53.4% of the total, a 13.6% increase over 2021 There was a 7.53%
ELECTRICITY GENERATION AND IMPORT THROUGHOUT THE
ENTIRE SYSTEM IN VIETNAM IN 2022 (unit: million kWh)
Hydroelectric Coal thermal power Gas turbinesOil thermal power Imported Renewable energyOther sources
57 increase in commercial electricity use from 2021 to 242.3 billion kWh From 2021 to 2022, the following increased: 10.78% for EVNHCMC, 8.71% for EVNSPC, 5.5% for EVNNPC, 6.09% for EVNCPC, and 7.38% for EVNHANOI A 6.17% rise from 2021 saw the amount of commercial electricity consumed per person reach 2,428 kWh A 4.22% rise in transmission power production was attained to 209,380 million kWh (as opposed to a 1.47% decline in 2021 due to the direct transmission of renewable energy sources, which heavily consumed the distribution grid) To effectively utilize power sources in the system, the power sector implemented an electrical system clamping down on subload demand
In 2023, about the electricity generation, the total amount of electricity produced and imported by the system in 2023 is 280.6 billion kWh, a 4.56% increase over 2022 The maximum subload capacity (Pmax) of the system as a whole in 2023 is 46,348 MW, up 2,01% from 2022 The estimated amount of electricity generated and purchased by EVN in 2023 is 271.1 billion kWh, a 3.45% increase from 2022 (of which 57.4% comes from external sources, EVNGENCOs accounts for approximately 27.8%, and the parent company EVN's power plants account for approximately 14.7%) To clarify, the following bar graph will demonstrate the electricity output generated and imported for each source in 2023
Graph 3.5 Electricity generation and import throughout the entire system in Viet
Nam in 2023 (unit: million kWh)
ELECTRICITY GENERATION AND IMPORT THROUGHOUT
THE ENTIRE SYSTEM IN VIETNAM IN 2023 (unit million kWh)
Hydroelectric Coal thermal power Gas turbines Oil thermal powerImported Renewable energy Other sources
The total amount of electricity used for commercial purposes in Vietnam in 2023 was 251.25 billion kWh, up 3.52% from 2022 Among these, the commercial, restaurant, and hotel sectors account for 5.35%, up 12.33% from 2022; agriculture, forestry, and fisheries account for 3.61%, up 8.12% from 2022; and other components account for 4.12%, up 2.46% from 2022 The industrial-building sector accounted for 50.85% and decreased by 2.23% from 2022; the management of consumption accounts for
36,08% and increased by 12.88% from 2022 The amount of commercial power used was 2,517 kWh per person, up 3.69% from 2022 There was a 4.9% rise in transmission production to 221,847 million kWh from 2022 The effective use of power sources in the active production system, power system operations, and the electricity market to meet sub-load demand and preserve industry stability may all be credited with achieving this power supply output
3.1.2 Overview of electricity industry enterprises listed on Vietnam stock market in the period 2009-2023
A) Overview of electricity industry enterprises listed on Vietnam stock market today
At the moment, there are 61 electricity companies that are listed on Vietnam stock market in which 21 companies are listed on HOSE exchange, 14 companies are listed on HNX exchange, 26 companies are listed on UpCoM exchange
Empirical results 57
Variable Obs Mean Std dev Min Max
Table 3.5 Descriptive statistic of quantitative variables in the research model
Among the power companies listed on the Vietnamese stock exchange between 2009 and 2023, the average return on assets (ROA) was 9.3662%, with an 8.9556% standard deviation 46.25% is the maximum value -7.11% is the minimum value
The average value of ROE ratio is 15.3659%; the standard deviation is 12.53%, 1.3984 times greater than the ROA variable's standard deviation The variable has a minimum value of -32.37% and a maximum value of 63.85% It might be said that there is a significant disparity in ROE amongst companies in the electrical sector
The average debt-to-asset level of the research sample's enterprises is around 42.44%, and the debt ratio variable TDTA has a standard deviation value of 23.36% Since the majority of the aforementioned organizations have more assets than debt, the ratio is nevertheless kept at a safe level, indicating that most are still able to make payments with their own available assets The minimum number, which is 2.32%, indicates that this company has a less hazardous capital structure and almost ever uses debt in its operations Furthermore, the maximum figure of 94.7% indicates that companies have a debt-to-asset ratio that is 0.947 times greater than their overall asset worth Thus, compared to companies in other industries, the majority of the power industry is said to be less autonomous, more dependent on creditors, or have a riskier capital structure
The average debt-to-equity level of the research sample's enterprises is around 1.2390, and the debt ratio variable TDTE has a standard deviation value of 1.699228 This tells that the majority of the aforementioned organizations have more debt than equity therefore the ratio is nevertheless kept at a high level, indicating that some companies are not still able to make payments with their own internal source The minimum number, which is 0,0237, indicates that some companies have a less hazardous capital structure and almost ever uses debt in its operations Furthermore, the maximum figure of 17.8856 indicates that companies have a debt-to-equity ratio that is 17.8856 times greater than their overall equity worth Thus, compared to companies in other industries, the majority of the power industry is said to have a riskier capital structure
With a standard deviation of 770.6%, the sample's enterprises' average sales growth is around 61.4% The control variable SG's minimum and maximum values span a wide range, from -100% to roughly 13950% This indicates that there is a significant variation in the sales of the businesses in the research sample While some businesses have experienced significant growth in sales, there are also businesses that are experiencing losses and sales reduction in comparison to the previous year
The CR control variable has a standard deviation of 2.775073 and an average value of 2.6064, both of which are reported at a good level With a minimum value of 0.06, it may be concluded that there is insufficient liquidity, indicating that certain enterprises have not made use of short-term assets to meet their debt payment commitments On the other side, when an electric firm has a lot of inventory and receivables, the maximum value of 19.31 would indicate that it has not actually managed its assets efficiently
The ratio of tangible fixed assets to total assets is represented by the asset structure variable (TANG), which has an average value of 49.8% and a standard deviation of
32.91% This statistic represents the value of the tangible fixed assets owned by companies in the electricity sector, which makes up only around 50% of the total assets held by businesses in that sector The observed values ranged from 0% being the minimum to 97.64% being the maximum This demonstrates the striking disparity in the two value milestones, indicating a distinct variation in the amount of money invested in enterprises' tangible fixed assets
The average value of the enterprise’s scale variable (SIZE) is 27.7232 The variable's values range from a minimum of 25.0927 to a maximum of 30.7108 The standard deviation of these firms' differences in scale is rather small, at 1.1709
The total asset turnover (AST) variable has an average value of around 0.6488 and a standard deviation of 0.8188 This means that, for every VND of capital invested in assets, firms will typically earn about 0.6488 VND of revenue Ninh Binh Thermal Power JSC has the maximum value of 6.49, while Central Hydropower JSC, EVN International JSC, Gia Lai
Hydropower JSC, Northern Electricity Development & Investment JSC No.2, and North-West Electric Investment and Development JSC have the minimum values of 0
According to descriptive data, Vietnam's economic growth is represented by the GDP macro index, which has an estimated annual growth rate of 5.98% with a standard deviation of 1.51% This average growth also represents the goal of developing Vietnam's economy set by the government over the past 15 years The index's minimum recorded value is 2.56%, and its maximum value is 8.02% throughout the period of 2009–2023 demonstrating the positive rise in Vietnam's GDP throughout this time
3.2.2 Correlation analysis and multicollinearity test
Determine the statistical level or the relationship between the focused variables by analyzing the correlation between the model's variables, such as ROA, ROE, TDTA, TDTE, CR, SG, AST, SIZE, TANG, and GDP, regardless of whether it is a dependent, independent, or control variable Another significant advantage of using correlation analysis is that it can be used to identify and eliminate variables that may lead to multicollinearity before running the regression model therefore enhancing the regression model's accuracy
ROA ROE TDTA TDTE CR SG AST SIZE TANG GDP
Table 3.6 Correlation between variables in the research model
Table 3.6 demonstrates that, with the two dependent variables of profitability, ROA and ROE, the independent variables TDTA, TDTE, and control variables, SG, SIZE, have a negative correlation This means that, when the values of TDTA, TDTE, SG, SIZE, decrease, ROA and
ROE will increase, and vice versa On the other hand, the remaining control variables, CR, AST,
TANG, GDP, show positive correlation results Therefore, ROA and ROE will increase when the values of these variables increase, and vice versa
Since all variable pairs have correlation coefficients less than 0.8, multicollinearity in the regression model is improbable Consequently, every pair of variables may be used to run the model Next, using two hypotheses, the study establishes multicollinearity phenomenon:
Variable TDTE TDTA CR SG AST SIZE TANG GDP
Table 3.7 VIF test for multicollinearity between variables
According to the test findings, the coefficient Mean VIF=1.61